Register to Access

Having Trouble Logging In?

Contact our technical support help desk at
1.800.366.4673. Representatives are available between
7:00 a.m. to 5:30 p.m. CDT, Monday through Friday.

This website is designed to facilitate the transmission
of mutual fund data, account information and sales
and educational materials to investment professionals.
By accessing this site you are verifying that you are an
investment professional.

Active managment – Going beyond the index

The debate over the merits of active and passive investing has been going on for some time. Ivy believes investors can derive the most long-term benefit through exposure to well-researched actively managed funds.

Market Perspectives/ 05.08.20

Looking beyond stock market volatility

Market volatility can be unsettling, but history shows that prices have returned to less volatile patterns over time. That can be good news for long-term investors.

Market trends show long-term investors generally have been rewarded over time. However, periods of extreme volatility can challenge even the most seasoned investors. Ivy believes having a perspective of the markets and the factors affecting them can be helpful in assessing current opportunities.

Navigating the Psychological Toll of COVID-19

Discover practice tips to helping support your clients during the pandemic.

Genlink

A succession plan for the next generation

You’ve spent your career teaching clients the importance of retirement planning and how to protect their assets. But have you considered what will happen to your business when it comes time for you to pass it to the next generation of advisors?

Genlink

Generational happiness

From loyalty to impact and autonomy to experiences discover how each generation defines happiness.

Ivy Investments

We stand for a legacy of expertise, focused on delivering strong, long-term results. Our name reflects our progressive product offerings and growing global presence as we continue to adapt to the needs of investors.

Market Sector Update

This quarter marked an unprecedented period globally not only for equity markets but for humanity. We hope the
readers of this quarterly commentary are healthy, safe and receiving the support they need. The market was
exceptionally weak this quarter, abruptly ending a decade long bull market and offering a humbling reminder that one
never knows what event will mark the end of an economic cycle or initiate the next recession. The Russell 1000 Growth
Index (the Portfolio’s benchmark) declined by 14.1% during the quarter, a sharp contrast to 2019’s annual gain of 36%.

Growth styles significantly outperformed value styles during the market drawdown during the quarter. Also clear was
the preference for larger capitalization styles as large caps outperformed mid caps and mid caps outperformed small
caps.

The quarter initially started with continued hope that easing credit conditions and financial policy loosening by global
centrals bank would ultimately lead to accelerating global economic growth later in 2020. The emergence of COVID-
19, a global pandemic, abruptly changed the narrative.

The spread of the coronavirus led to significant de-risking of markets around the globe. Central banks around the
world moved quickly to remove the risk of a credit freeze and massive liquidity issues. Global governments began to
ramp up fiscal policy efforts to stymie the blunt force of rising unemployment, fund inadequately equipped health care
systems, and provide cash flow to businesses that have been impaired by the containment efforts.

The performance of momentum factor strategies (relative strength) overwhelmed the performance of value factor
strategies (low valuations, such as price-to-earnings and price-to-cash flow) during the period. Growth (long-term
earnings per share growth) and quality (return on assets and return on capital) strategies also performed well.

Portfolio Strategy

Although it provided a negative return, the Portfolio outperformed its benchmark during the quarter by providing
strong downside capture during a challenging market environment. Performance benefited from strong stock selection
across numerous sectors: industrials, information technology, financials and real estate. Notable detractors during the
period were communication services and consumer staples.

Industrials posted a strong relative contribution to performance through overweight positions in CoStar Group and
Verisk Analytics as investors remained attracted to the high growth and high recurring revenue business models of
these companies. The Portfolio benefited from exiting its position in Boeing early in the quarter. The company saw
negative returns as COVID-19 severely impacts the global aerospace industry. Detractors in the period included
Stanley Black & Decker and Caterpillar. Both companies experienced negative returns as global economic growth
outlooks have been revised lower.

Information technology was another notable positive contributor led by an overweight position in NVIDIA Corp. where
investors anticipated a benefit from COVID-19 related activities, including a surge in utilization at data centers and
cloud computing requiring additional capacity due to shelter in place orders. Adobe and Microsoft were other positive
contributors as investors continued to favor companies with relatively higher growth and visibility. Detractors included
overweight positions in FleetCor, Motorola Solutions and Gartner.

Communication services and consumer staples represented key detractors in the period. Within communication services, the Portfolio’s position in Walt Disney saw negative returns. The position was fully eliminated by March 2020.
An underweight position in Netflix, which saw strong gains during the quarter, benefited from shelter in place orders
around the globe. Consumer staples was negatively impacted through the Portfolio’s exposure to Coca-Cola, which
underperformed relative to the benchmark due to a sharp decline in on-premise soda consumption at restaurants and
venues due to COVID-19 disruptions worldwide.

Portfolio changes include new positions in Cooper Companies, a leader in the contact lens market, and Tractor Supply,
a unique retailer focused on consumables for the rural lifestyle. Positions eliminated during the quarter included Walt
Disney, Boeing and Illumina.

Outlook

Certainty is hard to find in the current environment, especially regarding the impact of the collective efforts intended
to, 1) slow the spread of the virus, or 2) weather the economic impacts related to people sheltering from the virus. It is
difficult to be confident in knowing if these efforts will prove successful or adequate to limit further downside risks, but
we do know that additional resources will be made available if necessary, as is the case with bubbling momentum
around a significant infrastructure deal in the U.S. Over the next two or three quarters economic data will represent the
impacts from an unprecedented shock to the economic and social system around the globe. These data points are
unlikely to provide comfort. Our current thinking is that the U.S. economy, with significant global monetary and fiscal
support, survives this short-term stall and can return to growth in late 2020 and into 2021. It is important to recognize
that the steep equity market decline has prepared many stocks for these negative revisions. As such, as these
breathtaking revisions work through the system, we intend to focus on “normalized” earnings and growth. Long-term
opportunities always present themselves during these periods of volatility. We further assume that businesses and
personal lives will go back to something resembling the old normal, not some new environment in which everyone only
works from home, has food delivered, and connects through video conferencing. We expect travel to domestic and
global destinations to resume, we expect foodies to visit local eateries and maybe order sodas, we anticipate people
will get their eyes checked and reorder contact lenses, and yes, people will go to the hardware store to purchase those
new lithium-ion battery powered drills they have been wanting. Until those green shoots emerge, we believe our riskaware
process lends itself to holding up well while in periods of market volatility. The secret sauce is that we own
businesses we think are exceptional and can do well through a market cycle, not just in one flavor of a market cycle.
This doesn’t mean they will always be “up and to the right” but we think when we wake up in the morning, no matter
what has happened in the world, we will be comfortable owning these businesses. Thank you for your continued
support.

The opinions expressed are those of the Portfolio’s manager and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through March
31, 2020, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not
intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial
needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It is not possible to invest directly in an index.

The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises
caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined
with certainty.

Risk factors: The value of the Portfolio's shares will change, and you could lose money on your investment. Investing in companies involved primarily in a single asset class (large cap) may be more risky and volatile
than an investment with greater diversification. The Portfolio typically holds a limited number of stocks (generally 40 to 60), and the Portfolio’s portfolio manager also tends to invest a significant portion of the Portfolio’s
total assets in a limited number of stocks. As a result, the appreciation or depreciation of any one security held by the Portfolio may have a greater impact on the Portfolio’s NAV than it would if the Portfolio invested
in a larger number of securities or if the Portfolio’s portfolio manager invested a greater portion of the Portfolio’s total assets in a larger number of stocks. An investment in the Portfolio is not a bank deposit and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. These and other risks are more fully described in the Portfolio’s prospectus.

Annuities are long-term financial products designed for retirement purposes. Annuity and life insurance guarantees are based on the financial strength and claims-paying ability of the issuing insurance company. The
guarantees have no bearing on the performance of a variable investment option. Variable investment options are subject to market risk, including loss of principal. There are charges and expenses associated with
annuities and variable life insurance products, including mortality and expense risk charges, management fees, administrative fees, expenses for optional riders and deferred sales charges for early withdrawals.
Withdrawals before age 59 1/2 may be subject to a 10% IRS tax penalty and surrender charges may apply.

Lock this content.:

Market Sector Update

The S&P 500 Index, the Portfolio’s benchmark, declined more than 19% in first quarter 2020 as the domestic economy
shut down in response to COVID-19 related social distancing measures in the U.S. and around the world.

The first calendar quarter of 2020 will undoubtedly go down as a unique period in history, where we experienced a
truly global pandemic that has affected every major developed economy at essentially the same time. The result has
been an unprecedented shock to gross domestic product (GDP) growth with particularly negative effects on the U.S.,
given our dependence on consumption and services. Nearly two thirds of U.S. GDP is driven by consumption, including
travel, restaurant dining, sporting events and shopping. Of the 157 million employed workers at the end of 2019, 108
million jobs were related to service industries. Nearly 16 million jobs were tied directly or indirectly to the travel industry
and 13.5 million Americans were employed at restaurants. As the result of government-imposed stay at home orders,
the number of Americans filing for first-time unemployment benefits increased from 211,000 in early March to more
than 6.5 million by the week of March 20.

With unemployment rates highly unpredictable (other than the certainty of near-term worsening), U.S. GDP is equally
unpredictable. Economists believe second quarter GDP could fall 30-40% with a huge error factor for unprecedented
forecasting challenges. Most assume third quarter GDP will bounce back significantly (perhaps 20-30%), though this
timing is certain to be impacted by the rate that social distancing measures are relaxed. At the moment, we have very
little confidence anyone can predict with any degree of certainty how the next three, six or nine months will play out.

We also believe corporate confidence will be equally unstable in coming quarters. Having witnessed two previous
recessions, we are struck by the all-encompassing nature of this shock. Businesses thought to be defensive, including
Real Estate Investment Trusts (REITs), hospital and medical device companies, and even certain utilities, are seeing
unprecedented effects on their businesses. Firms of all types are seeing leverage ratios rise rapidly as EBITDA
(earnings before interest, taxes, depreciation and amortization) falls precipitously. For these reasons, we are
concerned the U.S. is only at the beginning of a multi-month recession.

Portfolio Strategy

Although the Portfolio returned negative performance in the first quarter of 2020, it outperformed the index for the
period. Outperformance during the quarter was due to a healthy balance between sector allocation and individual
stock selection. The Portfolio benefitted from a higher-than-normal cash position, averaging over 3% during the quarter
and 8% at the end of the quarter. Cash and cash equvialents accounted for slightly less than one third of the relative
performance, while stock selection accounting for roughly half of the performance. Our risk positions became far more
conservative early in the first quarter drawdown as it was evident the U.S. economy could see unprecedented
contraction based on stay-at-home orders affecting the majority of urban populations. In addition to cash and cash
equivalents, the portfolio’s underweight position in the energy sector as well as stock selection in financials (we had
less exposure to spread-based regional banks and companies sensitive to consumer credit), were key contributors
to Portfolio performance for the quarter.

Lessons learned during previous recessions (some the hard way) have helped the strategy hold up somewhat better
than the overall market. 2008-2009 was instructive in that during a full- blown financial crisis; the only safe haven was
cash. This time we increased the Portfolio’s cash position early in the market rout. While we have spent a lot time and
effort over the years on risk management, we also know that during a precipitous shock, risk models can blow up. Lowbeta
stocks can become high-beta stocks, for instance, or uncorrelated assets can quickly become correlated.Investors who owned supposedly defensive holdings – REITs, certain consumer staples, utilities and even gold – were
surely disappointed during the early stages of this sell-off. That said this drawdown, like others, has differentiated
companies according to balance sheet strength, free cash flow production, and earnings quality. A key focus of
the Portfolio has been to avoid or reduce stocks/sectors that are disproportionately affected by the nature of the
pandemic (travel, consumption, credit-focused financial institutions) in addition to managing risk factors proactively
(beta, earnings quality and leverage exposure).

Outlook

Looking ahead, the Portfolio continues to be positioned defensively, although we seek to utilize our cash position to
acquire what we believe to be discounted businesses with strong balance sheets and somewhat cyclical earnings
streams. Though simplistic, a traditional discounted cash flow analysis of many moderate growth companies would
suggest that year one and year two cash flows might account for 6-7% of a company’s long-run valuation if those cash
flows were to go to zero. Factoring in that businesses could very well see significantly negative cash flows for a year
or two during this downturn, we might expect the destruction in value to be 13-15%. Thus, when we see businesses
whose balance sheets would allow them to absorb a one or even two-year shock trading at a 30-50% discount, we will
seek to take advantage of those opportunities, assuming we believe the companies are equally attractive on the “other
side” of this recession. Specifically, we have selectively added names such as medical device suppliers, auto parts
retailers, food distributors, a health care REIT, and alternative investment managers that fit this bill. Given the
underperformance of value shares relative to growth in the most recent drawdown, we may seek to add value
exposure provided we have the utmost confidence in a company’s balance sheet and ability to endure a recession of
unknowable magnitude. Thanks for your continued confidence in Ivy. We look forward to updating you in the future.

The opinions expressed are those of the Portfolio’s manager and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through March
31, 2020, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not
intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial
needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

The S&P 500 Index is a float-adjusted market capitalization weighted index that measures the large-capitalization U.S. equity market. It is not possible to invest directly in an index.

The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises
caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined
with certainty.

>

Risk factors: The value of the Portfolio’s shares will change, and you could lose money on your investment. The Portfolio typically holds a limited number of stocks (generally 40 to 50). As a result, the appreciation
or depreciation of any one security held by the Portfolio may have a greater impact on the Portfolio's net asset value than it would if the Portfolio invested in a larger number of securities. Although larger companies
tend to be less volatile than companies with smaller market capitalizations, returns on investments in securities of large capitalization companies could trail the returns on investments in securities of smaller companies.
An investment in the Portfolio is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. These and other risks are more fully described in
the Portfolio’s prospectus.

Annuities are long-term financial products designed for retirement purposes. Annuity and life insurance guarantees are based on the financial strength and claims-paying ability of the issuing insurance company. The
guarantees have no bearing on the performance of a variable investment option. Variable investment options are subject to market risk, including loss of principal. There are charges and expenses associated with
annuities and variable life insurance products, including mortality and expense risk charges, management fees, administrative fees, expenses for optional riders and deferred sales charges for early withdrawals.
Withdrawals before age 59 1/2 may be subject to a 10% IRS tax penalty and surrender charges may apply.

Lock this content.:

Market Sector Update

The high yield municipal curve (Bloomberg Barclays High Yield Municipal Index) reversed the strong performance
over the last several quarters returning -6.88% for the first quarter. Returns were negative across the curve with longer
maturities losing the most. For comparison, the 5-year part of the curve lost 5.86% while the 22+ year part of the curve
returned -13.39%.

The onset of COVID-19 and social distancing has dramatically changed the economic outlook from where it was last
quarter. The Federal Reserve (Fed) cut the federal funds rate to zero and has reopened its bond buying program with
the expectation of more to follow. Discussions indicate it could potentially include municipal bond purchases, but is yet
to be determined.

Estimates are that unemployment could increase to high-single-digits or low-double-digits. Some economic impact
is expected to be offset by the recently passed stimulus bill, but the effects are likely to be limited until consumers
return to normal daily life.

The municipal bond market experienced unprecedented volatility in the quarter, particularly in March. Broadly, we
believe the municipal market presents better buying opportunities than we have seen in some time, specifically in
higher quality bonds where we see attractiveness in the longer part of the curve. We felt that high yield credit was
deteriorating coming into the year and believe the economic slowdown will cause elevated levels of distress.

Puerto Rico bonds returned -2.52% for the quarter, and the bankruptcy judge has ordered the postponement of
deadlines in the bankruptcy due to COVID-19. We continue to be wary of Puerto Rico bonds given the ongoing
uncertainty about timing and amount of recoveries. Except for the sales-tax bonds, we still believe Puerto Rico bonds
are “dead money,” meaning investors will receive no income from the bonds for the foreseeable future. With the Fund’s
focus on generating high levels of tax-exempt income, Puerto Rico bonds are not an appropriate investment at this
time.

Debt issuance for the first quarter was in line with the first quarter of 2019, but saw a notable decline in the last few
weeks of the quarter. Much of the refinancing activity took place in the taxable market, which was a continuation of the
trend that started in the second half of 2019. While supply is very limited for the time being, we could see a notable
increase in the second half of the year as the effects of effects of COVID-19 start to subside and the Fed keeps interest
rates near zero.

Portfolio Strategy

The Fund had a low-single-digit negative return, but outperformed relative to its benchmark and its peer group. The
Fund’s short duration versus the benchmark and focus on higher quality credit led to outperformance as high yield
underperformed investment grade.

The Fund’s duration is 55% of its benchmark, which reflects duration on the index extending faster than the Fund in
the recent selloff. We have been actively looking for attractive A- to AA-rated bonds, which we believe will recover
more quickly than high yield and will outperform if spreads continue to widen. We will be more aggressive in
lengthening duration going forward. We expect duration to be closer to, but still short of, benchmark duration by midyear.

The Fund has been reducing exposure to non-rated bonds. At the end of the quarter, exposure to non-rated bonds
was 22.9%. Non-rated bond spreads were at record lows coming into the year and we feel it is prudent to own more liquid, rated bonds in an effort to exploit any credit widening.

In total, the portfolio holds more than 5.5% of pre-refunded bonds, which has afforded and will continue to afford
ample liquidity for investment opportunities with higher interest rates and wider credit spreads. We plan on continuing
to hold pre-refunded bonds in the Fund as a source of additional liquidity moving forward. Likewise, with book yields
of more than 6%, the allocation may help the Fund provide a stable and attractive dividend yield.

We continue to favor revenue bonds over tax-backed debt. We think revenue bonds provide higher yields and better
diversification from the general tax and pension issues currently affecting many municipalities. While general
obligations have fared well in Chapter 9 bankruptcies, this trend changed after Detroit’s bankruptcy and we expect the
same outcome in the Title IV filing in Puerto Rico.

Outlook

While the selloff in municipal bonds has provided what we believe are more attractive investment opportunities, we
remain cautious on the high yield space as new issues brought to market in recent quarters came with weak covenants
and collateral for investors.

We saw an acceleration of both distressed and defaulted deals in 2019 and coming into the year believed this trend
was likely to continue. The recent economic slowdown is likely to exacerbate this trend. We will continue to monitor
high-yield issues for more attractive entry points and are hopeful that recent events will lead to investors receiving
better protection on newly underwritten deals.

We believe investors will continue to search for tax-exempt yield. Ratios between U.S. Treasuries and municipal
bonds are near historical highs, which should provide for more attractive investment opportunities.

We believe that recent weakness in the high-yield municipal market should continue in the near term as municipal
bond funds continue to see outflows and distressed or defaulted credits increase. Due to the number of poorly
structured deals, we expect defaults to increase materially in 2020 and recoveries could be less than historical results.

We expect the Fed to be “on hold” for the foreseeable future as rates are at zero. In light of the stimulus that has
been provided and is yet to come, there is a risk that inflation could increase once the economy starts to recover.

Going forward, we believe total supply should increase but the total for the year will be dependent on how soon
and how quickly the economy starts to recover. We believe current demand is strong enough to handle the increase
and the potential for the Fed to start buying municipal bonds would provide further support. We will continue to monitor
the breakdown between taxable and tax-exempt bonds.

One concern we have had is the consolidation of assets into a select few high yield municipal bond funds – as of
last year, five fund families controlled 80% of all high yield assets. That concentration has contributed to the recent
volatility in the municipal market and will continue to cause higher than normal volatility. We feel we are well positioned
to redeploy capital at more attractive spreads and lengthen duration quickly.

The opinions expressed are those of the Fund’s managers and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through March
31, 2020, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not
intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial
needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

All information is based on Class I shares.

The Bloomberg Barclays High Yield Municipal Index is an unmanaged index made up of bonds that are non-investment grade, unrated, or rated below Ba1 by Moody’s Investors Service with a remaining maturity of
at least one year. It is not possible to invest directly in an index.

The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets
in ways that cannot necessarily be foreseen. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.

Risk factors: The value of the Fund's shares will change, and you could lose money by investing. Fixed income securities are subject to interest rate risk and, as such, the net asset value of the fund may fall as
interest rates rise. Investing in below investment grade securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. The Fund may include a significant portion of its investments
that will pay interest that is taxable under the Alternative Minimum Tax (AMT). Exempt interest dividends the Fund pays may be subject to state and local income taxes. The portion of the dividends the Fund pays that
is attributable to interest earned on U.S. government securities generally is not subject to those taxes, although distributions by the Fund to its shareholders of net realized gains on the sale of those securities are
fully subject to those taxes. The municipal securities market generally, or certain municipal securities in particular, may be significantly affected by adverse political, legislative or regulatory changes or litigation at the
Federal or state level. These and other risks are more fully described in the fund’s prospectus. Not all funds or fund classes may be offered at all broker/ dealers.

Lock this content.:

Market Sector Update

The price action in the U.S. Treasury market was incredible during the quarter. As the novel coronavirus spread from
China to Europe to the U.S., the flight-to-quality trade in U.S. Treasuries was significant.

The Federal Reserve (Fed) engaged in an emergency rate cut of 50 basis points (bps) on March 3to a range of 1.00-
1.25%. Less than two weeks later at another emergency meeting, the Fed slashed the rate to 0%-0.25%.

Yields sank across all maturities on the yield curve. The 2-year U.S. Treasury note ended the quarter at 0.25%, a
massive 132 bps lower than the beginning of the quarter.

The credit market had a rough quarter. The Bloomberg Barclays U.S. Credit Index, a good gauge of credit spreads,
a subset of which is the Fund’s benchmark, had negative excess returns during each month in the quarter. Oil prices
began their significant drop right after the quarter began and contributed greatly to the underperformance in the credit
market. In March, however, nearly every credit sector and maturity experienced dramatic spread widening, similar to
the incredible price declines in the equity market.

While the Fed generally prefers to wait and see how the data plays out before taking a measured response, the
performance of the credit and equity markets was the only thing needed. The COVID-19 pandemic battle required
major programs to help relieve the market stress. Fed Chairman Jerome Powell and the other members of the Fed did
not hesitate to go all-in and came up with several programs aimed at helping financial markets.

The Fed is engaging in another round of quantitative easing (QE4), purchasing both U.S. Treasuries (including U.S.
Treasury Inflation-Indexed Bonds) and agency mortgage-backed securities for however long and in whatever quantity
is necessary. It is going to be purchasing investment grade corporate bonds with maturities of four years and less in
the primary (new issue) market, while it has a separate program to purchase investment grade corporate bonds with
maturities of five years and less in the secondary market. Additionally, it will also begin buying highly rated commercial
paper.

Other central banks around the world are following similar methods of supporting their markets in this tremendous
period of uncertainty and demand destruction, as most citizens of the U.S. and many citizens worldwide remain at
home in a concerted effort to bend the COVID-19 growth curve.

Portfolio Strategy

The Fund had positive performance in the quarter, mainly due to its large allocation to U.S. Treasury securities. It
outperformed its Morningstar peer group, but underperformed its benchmark.

The Fund has a smaller allocation to U.S. Treasuries than the benchmark causing much of the underperformance,
but it has a larger allocation than most of its peer group, contributing to the Fund’s strong performance relative to its
peers.

As opportunities arise to add spread without adding excessive risk, we may add more credit or mortgage-backed
securities exposure. However, we plan to keep a significant allocation to U.S. Treasuries for the foreseeable future.

Outlook

We believe that purchases of corporate bonds by the Fed will be supportive of the credit market in the maturities
this Fund owns. We think this should help the Fund as it is slightly overweight credit.

In our view, the U.S. is headed for a deep recession. At this writing, many people are working from home, others are
home, not working and strapped for cash, while others are considered essential and are working, yet fearful of virus
exposure and infection. Our health care workers and first responders are in the middle of the pandemic continually
facing the loss of life, while people mourn. We don’t know how long this new way of life will last, we don’t know how
this experience will change social activity in the future and we don’t know when the economy will rebound. Many
aspects of our life seem uncertain. From an investment standpoint, we believe short-term bond funds may offer an
opportunity in these times of financial uncertainty, as there are times when return of principal is often more important
than return on principal.

The opinions expressed are those of the Fund’s managers and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through March
31, 2020, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not
intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial
needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises
caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined
with certainty.

All information is based on Class I shares.

The Bloomberg Barclays U.S. Credit Index measures the investment grade, U.S. dollar-denominated, fixed-rate, taxable corporate and government-related bond markets, including a non-corporate component of non-
U.S. agencies, sovereigns, supranationals and local authorities. It is not possible to invest directly in an index.

Risk factors: The value of the Fund's shares will change, and you could lose money on your investment. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Fixed income securities are subject to interest rate risk and, as such, the net asset value of the Fund may fall as interest rate rise. These and other risks are
more fully described in the Fund's prospectus.

Lock this content.:

Market Sector Update

First quarter 2020 started off well: a trade truce between the U.S. and China was in the works, the ISM Manufacturing
Index had crossed back over 50 and general economic momentum was healthy. Coming off a banner performance in
calendar year 2019, the market was holding it together through most of February. Then the bottom fell out.

The COVID-19 global pandemic was upon us, and the Russell 2000 Growth Index, the Fund’s benchmark,
experienced its worst quarterly performance on record. In such an unprecedented crisis environment, fear and
uncertainty ruled. Small caps are naturally deemed to be a riskier class of stocks, and accordingly they declined much
more severely than large caps.

A review of asset class characteristics for the quarter show the one clear discrepancy among small-cap holdings
was the balance sheet. Companies that were perceived to be over-leveraged or liquidity challenged were the worst
performers in the quarter. Those companies with the cleanest balance sheets declined the least.

Similarly, cyclical sectors that were most impacted by demand shocks or shut-in orders were among the benchmark’s
worst performers, specifically the energy and consumer discretionary sectors. However, the Fund’s two largest sector
weightings – health care sector and information technology – outperformed for the quarter.

Portfolio Strategy

The Fund delivered a negative return, but outperformed its benchmark for the quarter.

The Fund’s performance in comparison to the benchmark was driven by stock selection within the health care and
information technology sectors. An exemplary health care holding was Teledoc Health, Inc., a leading telemedicine
provider that uses web-based and mobile technology to provide on-demand medical care.

Telemedicine is an emerging health care growth industry that was catapulted onto the stage as a result of the COVID-
19 pandemic. As the leading player in the market, Teledoc Health was a disproportionate beneficiary of the current
health care environment as reflected in the company’s performance for the quarter.

Within the information technology sector, the Fund’s software position once again outperformed, led by Five9, Inc.,
Proofpoint, Inc. and Smartsheet, Inc. Additional gains were realized in the semiconductor space from both Monolithic
Power Systems, Inc. and Enphase Energy, Inc. The technology services group saw a gain from the take-out of our
position in InterXion Holding, NV by Digital Realty, and another steady performance from Booz, Allen, and Hamilton.

The Fund has exited all positions in energy holdings given the challenges facing that sector.

Outlook

The strategy for fiscal year 2021 will be a challenge given the uncertainty of the magnitude and duration of the
coronavirus impact on the global economy. The key attributes for the Fund during this period include a balance of
defensive and aggressive positions from a portfolio perspective.

At the individual security level, we continue to place emphasis on strong balance sheets and high quality business
models. Equally important to those characteristics is an ability to manage through the crisis and be positioned to
resume growth once it recedes. We’re not looking for the bombed-out cyclicals that may get a large initial recovery
trade.

The COVID-19 outbreak will impact some secular trends so it is crucial to identify the true growth companies that
can weather the storm and provide multi-year returns in excess of peers. The best example here is the acceleration of
telemedicine, which has surged during the crisis and is likely to become a standard of care once we are past the crisis.

Other trends likely to regain momentum include remote work and remote school, which will likely continue to
generate strong demand for the infrastructure performance of existing technology networks and the software
applications that run on them.

The opinions expressed are those of the Fund’s managers and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through March
31, 2020, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not
intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial
needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

All information is based on Class I shares.

The Russell 2000 Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It is not possible to invest directly in an index.

The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets
in ways that cannot necessarily be foreseen. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.

Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. Investing in small-cap stocks may carry more risk than investing in stocks of larger more well-established
companies. The Fund may invest in Initial Public Offerings (IPOs), which can have a significant positive impact on the Fund’s performance that may not be replicated in the future. An investment in the Fund is not a
bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Not all funds or fund classes may be offered at all broker/dealers. These and other risks
are more fully described in the Fund’s prospectus.

Lock this content.:

Market Sector Update

Mid-cap growth stocks, as measured by the Russell Midcap Growth Index (Fund’s benchmark), lost 20.04% in the first
quarter of 2020. This was a swift reversal from what was a very strong 2019 for the category, marking the end of a 10+
year bull market. The selling that overcame almost all markets in the last half of the quarter was indiscriminate, as the
global coronavirus pandemic presented considerable uncertainty about the health of humans and of economies
worldwide. Risk was reduced broadly, but even more significantly by investors who were particularly vulnerable to the
leverage they had built into their investment approaches. It is the strain on these investors that often drives the market
to excess, making the turmoil palpable for all, reinforcing downside pressure in the market. The forced selling
eventually subsides, and new information becomes available to help investors make rational decisions about the
future. It is in such market environments that our strategy – our core process and philosophical approach to investing
– strives to serve well those who entrust us with their money. Our approach emphasizes quality business models and
balance sheets, both of which are important business attributes always, but especially when the integrity of economies
and the companies that function within those economies are at risk. Our willingness and ability to take a long-range
view to investing in strong companies with durable growth outlooks helps the Fund during the storm and the
wherewithal to reposition into opportunities we have been considering yet wanted to buy at more reasonable
valuations.

Portfolio Strategy

Although the Fund returned negative double-digit performance in the quarter, it outperformed the index for the period
and significantly led the index on a trailing 12-month basis. Outperformance within the index came from consumer
staples, real estate, health care, information technology, and, to a minor extent, materials. Most are generally defensive
sectors with respect to the consistency of demand within their businesses. Energy, consumer discretionary,
communication services, industrials and financials all underperformed the index in the quarter. Relative
outperformance within the Fund came from within industrials, health care, communication services and information
technology. Our consumer discretionary performance was neutral to relative performance, and our materials, energy,
real estate, financials and consumer staples sectors contributed negatively to relative performance in the quarter.

Our industrials, health care and communications services sectors drove much of the performance in the quarter. Our
industrials names made the strongest contribution to relative performance in the quarter. We were overweight this
underperforming group, but stock selection shone, and our names performed well versus both the index and the sector
within the index. Our health care stocks delivered against both the index, and the health care sector within the index.
A number of our names actually gained value in the quarter. In communication services, Electronic Arts performed well,
contributing significantly to the Fund’s relative performance in the quarter.

Performance of our consumer discretionary names was neutral to the index in the quarter. Stock selection was helpful
to performance, but the Fund was overweight this underperforming sector, the impact of which offset most of the
benefit of stock selection. A slight negative currency effect related to our exposure to Burberry was the final offset to
stock selection. Most of the Fund’s consumer discretionary holdings performed well, but a number of names lost
significant value as the cloud of coronavirus-related non-essential business closures began to cast a wide and dark
shadow across the U.S. economy.

Materials made the largest negative contribution to relative performance in the quarter, as one stock, Axalta Coating
Systems produced the overwhelming share of the underperformance from the group. This automotive and industrials
coatings company has struggled in recent years due to economic weakness in China and Europe, and tariff-related issues. Energy names were quite weak in the quarter, as disagreement about oil production targets within OPEC on
top of greatly diminished worldwide oil demand caused a steep sell-off in the price. Our energy exposure detracted
from relative performance, completely based on stock selection, as we were able to contain the damage with an
underweight exposure to the sector. We had no exposure to the outperforming real estate sector in the quarter, which
detracted from relative performance. The sector’s performance within the index was supported by its largest
constituent. Our financials and consumer staples exposures were both negative to relative returns in the quarter,
in about equal measure. In financials, two of our bank names struggled as interest rates declined precipitously as the
coronavirus-related economic crisis unfolded, and credit issues became a threat. Hershey Company, a holding in
consumer staples, outperformed both the index and the sector within the index. However, we were sufficiently
underweight this group – which held up well in the quarter – to post a negative contribution to overall portfolio return.
Cash and cash equivalents, which averaged less than 2% in the quarter, contributed 0.05% to relative performance,
while equity options detracted by 0.07%.

Outlook

We are beginning to see some global progress in the health care battle against the virus, but the damage to world
economies will require an ongoing assessment that likely delivers more bad news before much good news develops.
Our framework for economic growth and progress in the markets hinges on that of our global macroeconomic team,
whose forecast for the U.S. includes a better than 20% decline in second quarter gross domestic product (GDP) growth
before a recovery that begins in third quarter 2020 and continues into 2021 at a modest pace of growth. The outlook
is that the U.S. economy will recoup the lost 2020 GDP, actual plus expected growth, only as we turn the calendar into
2022, somewhat more than a year and a half from today. The forecast is subject to change, depending largely on the
course and duration of the pandemic in the U.S. and the ultimate impact on small- and medium-size businesses.

The result of all of this will be a market that continues to be very volatile. Active managers should find opportunity to
invest in companies that will survive and thrive exiting this crisis. While there will be phases in the market when the
worst performing, lower quality stocks have strong moves to the upside relative to the overall market, these phases
tend to be short-lived and capped at prices and valuations that reflect the limited outlook of many companies.

Beyond the uncertainty we see diminished dividends and stock buyback programs as further limiting market
appreciation. Our approach to investing in high-quality growth companies has generally performed well in both strong
and weak markets. We expect our focus on strong balance sheets will remain important as economic stress presents
challenges to many businesses. Further, our companies have durable growth opportunities that should allow them to
deliver earnings independent of stock buyback-derived earning-per-share growth. We will continue to focus on strong
and differentiated durable growth opportunities, increasing our allocation to existing exposures where possible at
suddenly much more attractive prices, adding new stocks where price action has made names of interest much more
reasonable to buy, and exiting positions where challenges old or new seem unlikely to resolve themselves
satisfactorily relative to our investment thesis and within our time horizon.

The opinions expressed are those of the Fund’s managers and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through March
31, 2020, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not
intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial
needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

The Russell Midcap Growth Index measures the performance of the mid-cap growth segment of the U.S. equity universe. It is not possible to invest directly in an index.

All information is based on Class I shares.

The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises
caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined
with certainty.

Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. Investing in mid-cap growth stocks may carry more risk than investing in stocks of larger more well-established
companies. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Not all funds or fund classes may be
offered at all broker/dealers. These and other risks are more fully described in the Fund’s prospectus.

Lock this content.:

Market Sector Update

This quarter marked an unprecedented period globally not only for equity markets but for humanity. We hope the
readers of this quarterly commentary are healthy, safe and receiving the support they need. The market was
exceptionally weak this quarter, abruptly ending a decade long bull market and offering a humbling reminder that one
never knows what event will mark the end of an economic cycle or initiate the next recession. The Russell 1000 Growth
Index (the Fund’s benchmark) declined by 14.1% during the quarter, a sharp contrast to 2019’s annual gain of 36%.

Growth styles significantly outperformed value styles during the market drawdown during the quarter. Also clear was
the preference for larger capitalization styles as large caps outperformed mid caps and mid caps outperformed small
caps.

The quarter initially started with continued hope that easing credit conditions and financial policy loosening by global
centrals bank would ultimately lead to accelerating global economic growth later in 2020. The emergence of COVID-
19, a global pandemic, abruptly changed the narrative.

The spread of the coronavirus led to significant de-risking of markets around the globe. Central banks around the
world moved quickly to remove the risk of a credit freeze and massive liquidity issues. Global governments began to
ramp up fiscal policy efforts to stymie the blunt force of rising unemployment, fund inadequately equipped health care
systems, and provide cash flow to businesses that have been impaired by the containment efforts.

The performance of momentum factor strategies (relative strength) overwhelmed the performance of value factor
strategies (low valuations, such as price-to-earnings and price-to-cash flow) during the period. Growth (long-term
earnings per share growth) and quality (return on assets and return on capital) strategies also performed well.

Portfolio Strategy

Although it provided a negative return, the Fund outperformed its benchmark during the quarter by providing strong
downside capture during a challenging market environment. Performance benefited from strong stock selection across
numerous sectors: industrials, information technology, financials and real estate. Notable detractors during the period
were communication services and consumer staples.

Industrials posted a strong relative contribution to performance through overweight positions in CoStar Group and
Verisk Analytics as investors remained attracted to the high growth and high recurring revenue business models of
these companies. The Fund benefited from exiting its position in Boeing early in the quarter. The company saw
negative returns as COVID-19 severely impacts the global aerospace industry. Detractors in the period included
Stanley Black & Decker and Caterpillar. Both companies experienced negative returns as global economic growth
outlooks have been revised lower.

Information technology was another notable positive contributor led by an overweight position in NVIDIA Corp. where
investors anticipated a benefit from COVID-19 related activities, including a surge in utilization at data centers and
cloud computing requiring additional capacity due to shelter in place orders. Adobe and Microsoft were other positive
contributors as investors continued to favor companies with relatively higher growth and visibility. Detractors included
overweight positions in FleetCor, Motorola Solutions and Gartner.

Communication services and consumer staples represented key detractors in the period. Within communication services, the Fund’s position in Walt Disney saw negative returns. The position was fully eliminated by March 2020.
An underweight position in Netflix, which saw strong gains during the quarter, benefited from shelter in place orders
around the globe. Consumer staples was negatively impacted through the Fund’s exposure to Coca-Cola, which
underperformed relative to the benchmark due to a sharp decline in on-premise soda consumption at restaurants and
venues due to COVID-19 disruptions worldwide.

Portfolio changes include new positions in Cooper Companies, a leader in the contact lens market, and Tractor Supply,
a unique retailer focused on consumables for the rural lifestyle. Positions eliminated during the quarter included Walt
Disney, Boeing and Illumina.

Outlook

Certainty is hard to find in the current environment, especially regarding the impact of the collective efforts intended
to, 1) slow the spread of the virus, or 2) weather the economic impacts related to people sheltering from the virus. It is
difficult to be confident in knowing if these efforts will prove successful or adequate to limit further downside risks, but
we do know that additional resources will be made available if necessary, as is the case with bubbling momentum
around a significant infrastructure deal in the U.S. Over the next two or three quarters economic data will represent the
impacts from an unprecedented shock to the economic and social system around the globe. These data points are
unlikely to provide comfort. Our current thinking is that the U.S. economy, with significant global monetary and fiscal
support, survives this short-term stall and can return to growth in late 2020 and into 2021. It is important to recognize
that the steep equity market decline has prepared many stocks for these negative revisions. As such, as these
breathtaking revisions work through the system, we intend to focus on “normalized” earnings and growth. Long-term
opportunities always present themselves during these periods of volatility. We further assume that businesses and
personal lives will go back to something resembling the old normal, not some new environment in which everyone only
works from home, has food delivered, and connects through video conferencing. We expect travel to domestic and
global destinations to resume, we expect foodies to visit local eateries and maybe order sodas, we anticipate people
will get their eyes checked and reorder contact lenses, and yes, people will go to the hardware store to purchase those
new lithium-ion battery powered drills they have been wanting.

Until those green shoots emerge, we believe our risk-aware process lends itself to holding up well while in periods
of market volatility. The secret sauce is that we own businesses we think are exceptional and can do well through a
market cycle, not just in one flavor of a market cycle. This doesn’t mean they will always be “up and to the right” but
we think when we wake up in the morning, no matter what has happened in the world, we will be comfortable owning
these businesses. Thank you for your continued support.

The opinions expressed are those of the Fund’s manager and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through March
31, 2020, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not
intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial
needs, risk tolerance and time horizon.Past performance is not a guarantee of future results.

The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It is not possible to invest directly in an index.

All information is based on Class I shares.

The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises
caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined
with certainty.

Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. Investing in companies involved primarily in a single asset class (large cap) may be more risky and volatile
than an investment with greater diversification. The Fund typically holds a limited number of stocks (generally 40 to 60), and the Fund’s portfolio manager also tends to invest a significant portion of the Fund’s total
assets in a limited number of stocks. As a result, the appreciation or depreciation of any one security held by the Fund may have a greater impact on the Fund’s NAV than it would if the Fund invested in a larger
number of securities or if the Fund’s portfolio manager invested a greater portion of the Fund’s total assets in a larger number of stocks. An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Not all funds or fund classes may be offered at all broker/dealers. These and other risks are more fully described in the
Fund’s prospectus.

Lock this content.:

Market Sector Update

The S&P 500 Index, the Fund’s benchmark, declined more than 19% in first quarter 2020 as the domestic economy
shut down in response to COVID-19 related social distancing measures in the U.S. and around the world.

The first calendar quarter of 2020 will undoubtedly go down as a unique period in history, where we experienced a
truly global pandemic that has affected every major developed economy at essentially the same time. The result has
been an unprecedented shock to gross domestic product (GDP) growth with particularly negative effects on the U.S.,
given our dependence on consumption and services. Nearly two thirds of U.S. GDP is driven by consumption, including
travel, restaurant dining, sporting events and shopping. Of the 157 million employed workers at the end of 2019, 108
million jobs were related to service industries. Nearly 16 million jobs were tied directly or indirectly to the travel industry
and 13.5 million Americans were employed at restaurants. As the result of government-imposed stay at home orders,
the number of Americans filing for first-time unemployment benefits increased from 211,000 in early March to more
than 6.5 million by the week of March 20.

With unemployment rates highly unpredictable (other than the certainty of near-term worsening), U.S. GDP is equally
unpredictable. Economists believe second quarter GDP could fall 30-40% with a huge error factor for unprecedented
forecasting challenges. Most assume third quarter GDP will bounce back significantly (perhaps 20-30%), though this
timing is certain to be impacted by the rate that social distancing measures are relaxed. At the moment, we have very
little confidence anyone can predict with any degree of certainty how the next three, six or nine months will play out.

We also believe corporate confidence will be equally unstable in coming quarters. Having witnessed two previous
recessions, we are struck by the all-encompassing nature of this shock. Businesses thought to be defensive, including
Real Estate Investment Trusts (REITs), hospital and medical device companies, and even certain utilities, are seeing
unprecedented effects on their businesses. Firms of all types are seeing leverage ratios rise rapidly as EBITDA
(earnings before interest, taxes, depreciation and amortization) falls precipitously. For these reasons, we are
concerned the U.S. is only at the beginning of a multi-month recession.

Portfolio Strategy

Although the Fund returned negative performance in the first quarter of 2020, it outperformed the index for the
period.

The Fund’s outperformance during the quarter was due to a healthy balance between sector allocation and individual
stock selection. The portfolio benefitted from a higher-than-normal cash position, averaging over 3% during the quarter
and 8% at the end of the quarter. Cash and cash equvialents accounted for slightly less than one third of the relative
performance, while stock selection accounting for roughly half of the performance. Our risk positions became far more
conservative early in the first quarter drawdown as it was evident the U.S. economy could see unprecedented
contraction based on stay-at-home orders affecting the majority of urban populations. In addition to cash and cash
equivalents, the portfolio’s underweight position in the energy sector as well as stock selection in financials (we had
less exposure to spread-based regional banks and companies sensitive to consumer credit), were key contributors to
Fund performance for the quarter.

Lessons learned during previous recessions (some the hard way) have helped the Fund strategy hold up somewhat
better than the overall market. 2008-2009 was instructive in that during a full- blown financial crisis; the only safe
haven was cash. This time we increased the Fund’s cash position early in the market rout. While we have spent a lot time and effort over the years on risk management, we also know that during a precipitous shock, risk models can
blow up. Low-beta stocks can become high-beta stocks, for instance, or uncorrelated assets can quickly become
correlated. Investors who owned supposedly defensive holdings – REITs, certain consumer staples, utilities and even
gold – were surely disappointed during the early stages of this sell-off. That said this drawdown, like others, has
differentiated companies according to balance sheet strength, free cash flow production, and earnings quality. A key
focus of the Fund has been to avoid or reduce stocks/sectors that are disproportionately affected by the nature of the
pandemic (travel, consumption, credit-focused financial institutions) in addition to managing risk factors proactively
(beta, earnings quality and leverage exposure).

Outlook

Looking ahead, the Fund continues to be positioned defensively, although we seek to utilize our cash position to
acquire what we believe to be discounted businesses with strong balance sheets and somewhat cyclical earnings
streams. Though simplistic, a traditional discounted cash flow analysis of many moderate growth companies would
suggest that year one and year two cash flows might account for 6-7% of a company’s long-run valuation if those cash
flows were to go to zero. Factoring in that businesses could very well see significantly negative cash flows for a year
or two during this downturn, we might expect the destruction in value to be 13-15%. Thus, when we see businesses
whose balance sheets would allow them to absorb a one or even two-year shock trading at a 30-50% discount, we will
seek to take advantage of those opportunities, assuming we believe the companies are equally attractive on the “other
side” of this recession. Specifically, we have selectively added names such as medical device suppliers, auto parts
retailers, food distributors, a health care REIT, and alternative investment managers that fit this bill. Given the
underperformance of value shares relative to growth in the most recent drawdown, we may seek to add value
exposure provided we have the utmost confidence in a company’s balance sheet and ability to endure a recession of
unknowable magnitude. Thanks for your continued confidence in Ivy. We look forward to updating you in the future.

The opinions expressed are those of the Fund’s managers and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through Dec.
31, 2019, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not
intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial
needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

All information is based on Class I shares.

The S&P 500 Index is a float-adjusted market capitalization weighted index that measures the large-capitalization U.S. equity market. It is not possible to invest directly in an index.

The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises
caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined
with certainty.

Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. Because the Fund is generally invested in a small number of stocks, the performance of any one security held
by the Fund will have a greater impact than if the Fund were invested in a larger number of securities. Although larger companies tend to be less volatile than companies with smaller market capitalizations, returns
on investments in securities of large capitalization companies could trail the returns on investments in securities of smaller companies. An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency. These and other risks are more fully described in the Fund’s prospectus. Not all funds or fund classes may be offered at all broker/dealers.

Lock this content.:

Market Sector Update

The first quarter of 2020 will undoubtedly be one of the most historic periods for not only the economy and capital
markets, but for modern civilization. To begin the year, markets were coming off a period where the trade war overhang
had lifted and economic activity in international markets was on a positive trajectory. The biggest risk to global equity
markets appeared to be U.S. elections. This quickly reversed as COVID-19 put economies at a standstill and oil
collapsed as demand vanished and a dispute broke out between Russia and Saudi Arabia.

The U.S. dollar also added some pressure to U.S.-based returns as it appreciated roughly 2.75% against a basket of
currencies. Government bond yields moved significantly lower as central banks across the world aggressively cut
benchmark rates.

All sectors were in deep negative territory for the quarter. Returns amongst sectors were dispersed in a classic bear
market or recessionary manner, with defensive sectors holding-up significantly better than more economically
sensitive sectors. Health care performed the best, down 8.9%. Energy, which also faced pressure from the Russia-
Saudi Arabia rift, was down 36.2% for the quarter.

In the face of what will likely be the sharpest economic downturn in decades, governments and central banks tapped
their financial war chests and launched all possible weapons at their disposal. This was met with some relief in the
markets toward the end of the quarter, but markets were still down significantly.

Portfolio Strategy

The Portfolio posted negative performance for the quarter and underperformed its benchmark index.
Underperformance was largely driven by poor stock selection in financials and industrials, an underweight allocation
and stock selection in Japan, and the Portfolio’s allocation to energy where a relative overweight and stock selection
detracted from performance. On the positive side, stock selection in real estate and consumer discretionary helped as
well as an underweight to financials. The Portfolio’s cash and gold allocations also benefitted performance.

Of note, top relative detractors to performance included Airbus SE, Seven Generations Energy Ltd., Class A and BNP
Paribas S.A. Airbus produces aircraft and military equipment. The stock plunged because air travel was adversely
affected by COVID-19, which led to production cuts. We continue to like Airbus as it maintains a dominant market share
in an oligopolistic industry, strong free cash flow and solid balance sheet. We believe the long-term secular growth
trends in air travel remain intact.

Seven Generations Energy is a Canadian oil company. The stock plunged with the decline in oil prices. We continue
to hold the stock as we believe Seven Generations Energy is much more likely to survive than the stock price implies.
They are lower on the cost curve and we believe they have a stronger balance sheet than most North American peers.

BNP is a diversified Paris-based global bank. The stock sank with investor concern that, like other banks, it would
be required by regulators to cancel its annual dividend (it has been delayed) and a deteriorating earnings outlook in
light of issues related to COVID-19. We continue to hold the stock given its lower-than-average risk profile and its ability
to continue to consolidate market share in Europe.

On the positive side, SMC Corp., Ubisoft Entertainment S.A., and Deutsche Wohnen AG were the greatest contributors
to performance. SMC is a Japanese global industrial company with a position in factory automation and significant
exposure (50% of business base) to automotive and electronic end markets. The strong stock performance reflects
continued market share gains which are driving higher margins, expectations for continued recovery in semi equipment and in China, and strong demand in electronics.

Ubisoft is a French company that is one of the largest videogame producers/distributors in the world. The stock held
up well in part because of the defensive nature of the business, including the popularity of gaming during COVID-19.
We believe management is taking measures to be more competitive and there is a strong secular growth story.

Deutsche Wohnen manages and develops residential and commercial properties in Germany, primarily in Berlin. The
stock dropped in 2019 due to an unexpected announcement by Berlin politicians of a rent freeze for five years. The
stock has been recovering as the appeal process to the highest German court was initiated, valuations of its properties
increased. Also, the company has been buying back stock.

Over the quarter, the Portfolio was relatively active. As relative value managers, opportunities like this don’t come
often. One recent purchase was Compass Group plc, a U.K.-based catering and food services company. With a large
U.S. business, shares fell sharply with the U.S. restaurant sector. However, they do not have large fixed costs or asset
base and have a more manageable debt load. Compass is an example where this market volatility gave us an
opportunity to invest in what we believe is a high-quality business with strong long-term prospects at a compelling
valuation.

The Portfolio sold China Construction Bank Corp. as it had been a meaningful outperformer.

Outlook

The world has quickly changed – COVID-19 has taken a very large toll on capital markets and volatility will likely
continue as anticipation of the severity and duration of the outbreak evolves and companies report earnings.

Oil is also top of mind. Low demand and oversupply will continue to depress oil prices until these pressures ease.
There will likely be an agreement between Russia and Saudi Arabia as talks seem to be underway. This will help the
supply side of the equation, but demand will not recover until economic activity normalizes. In the end, companies low
on the cost curve with strong balance sheets and good assets will survive and thrive as the weaker players fade away.

Monetary policy will be very accommodative throughout the world. Central banks will likely exhaust everything at
their disposal to keep economies afloat. Fiscal stimulus is also a key component of economic survival. Whether it is
large spending packages like in the U.S. or large-scale investments directly in public equities like in Japan, this
government behavior will continue.

The world will eventually recover, but the timeline of this pandemic is still unknown and the range of outcomes is
wide. We believe a depth of knowledge in the business models we invest in, the sustainability of their balance sheets,
and buying them at perceived attractive relative valuations is a well-suited approach in this environment.

The opinions expressed are those of the Portfolio’s managers and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through
March 31, 2020, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is
not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives,
financial needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises
caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined
with certainty.

Risk factors: The value of the Portfolio's shares will change, and you could lose money on your investment. An investment in the Portfolio is not a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. International investing involves additional risks including currency fluctuations, political or economic conditions affecting the foreign country, and differences in
accounting standards and foreign regulations. These risks are magnified in emerging markets. These and other risks are more fully described in the Portfolio's prospectus.

Annuities are long-term financial products designed for retirement purposes. Annuity and life insurance guarantees are based on the financial strength and claims-paying ability of the issuing insurance company. The
guarantees have no bearing on the performance of a variable investment option. Variable investment options are subject to market risk, including loss of principal. There are charges and expenses associated with
annuities and variable life insurance products, including mortality and expense risk charges, management fees, administrative fees, expenses for optional riders and deferred sales charges for early withdrawals.
Withdrawals before age 59 1/2 may be subject to a 10% IRS tax penalty and surrender charges may apply.

Lock this content.:

The COVID-19 pandemic has changed everything in the market. Pre-COVID-19, U.S. growth was on track to
accelerate. The U.S. trade deal with China was signed in January and business confidence was improving. Capital
expenditures were rising, job growth was solid, the stock market was hitting new highs, housing activity was robust
and consumer confidence was elevated. Additionally, President Donald Trump was acquitted of impeachment on Feb.
5. Based on these very positive conditions, we had expected the Federal Reserve (Fed) to remain “on hold” through at
least the end of the year, probably much longer. Everything changed late-February/early-March with the onset of the
COVID-19 pandemic. Shelter-in-place mandates were rolled out; schools closed and non-essential businesses were
shut down across the country. This quickly led to a collapse in nearly every high frequency economic indicator, moving
many to recessionary levels with some already at record lows. As it stands, the U.S. economy is essentially shut down.
A collapse in oil prices added to the already dire situation.

The Fed responded with an emergency rate cut of 50 basis points on March 3, followed by another rate cut on March
12, taking the federal funds rate to 0%. The Fed is engaging in another round of quantitative easing (QE4), purchasing
both U.S. Treasuries (including U.S. Treasury Inflation-Indexed Bonds) and agency mortgage-backed securities for
however long and in whatever quantity is necessary. It is going to be purchasing investment grade corporate bonds
with maturities of four years and less in the primary (new issue) market, while it has a separate program to purchase
investment grade corporate bonds with maturities of five years and less in the secondary market. Additionally, it will
also begin buying highly rated commercial paper. It also announced the Money Market Mutual Fund Liquidity Facility
(MMLF) program to assist money market mutual funds in meeting demands for redemptions by households and other
investors, enhancing overall market functioning and the provision of credit to households, businesses and
municipalities. To provide liquidity to money market mutual funds, the Federal Reserve Bank of Boston will lend to
eligible borrowers, taking as collateral certain types of assets purchased by the borrower from funds. Such collateral
included U.S. municipal snort-term debt and subsequently expanded to include municipal variable rate demand notes.
Subsequently, the Senate passed a $2.2 trillion stimulus package (CARES Act) that extends aid to state and local
governments, while also giving the Fed the power to buy their debt (details are to be determined). These measures,
along with the MMLF now have the market essentially backstopped by both Congress and the Fed, and reduced
market volatility to some extent moving into quarter-end.

During the quarter, volatility spiked to historical highs. Pre-COVID-19, municipal rates were grinding lower. However,
with the onset of the pandemic, market volatility spiked. Daily rate moves, both up and down, were extremely large
between March 9 and the end March, making transacting in the market very difficult with market liquidity stressed.
When measured from the beginning of the year to quarter-end, rates are actually lower, but the volatility during the
quarter was unprecedented.

Defaults in the municipal bond asset class continue to be rare and tend to be highly concentrated in the high-yield
space. While we anticipate these conditions to persist, we anticipate many credit downgrades going forward. In our
view, there is not a sector in the municipal bond space that will avoid the negative impact of these unprecedented
circumstances. We are beginning to see distressed situations in the high-yield space with more frequency. This will
need to be monitored closely, as we believe an acceleration of defaults or impairments on a larger scale would impact
the high-grade space as funds sell the highest quality, most liquid holdings, to fund investor redemptions. This is
something that we are observing already.

Portfolio Strategy

The Fund posted a negative total return for the quarter, but outperformed both the peer group and its benchmark.
The portfolio duration is currently shorter than its benchmark, and the portfolio is defensively structured with a higher
quality emphasis.

We will continue to place emphasis on diversification, higher (overall) credit quality and yield curve positioning.

Persistent credit surveillance will be critical in this environment.

Outlook

We remain confident in our belief that investment-grade municipal bond defaults will continue to be much lower than
any other fixed-income alternatives except U.S. Treasuries. However, we expect to see downgrades in the investmentgrade
space, as we believe there is not a sector or issuer that can completely avoid the negative impact of the
pandemic. We will continue to strive to avoid any issuer that will be impacted severely.

Municipal bonds currently provide attractive relative value for fixed income investors, especially for those in high
tax brackets. However, given the current market conditions, we need to proceed with caution, as we may be entering
a redemption cycle, which could pressure the market further.

While the Fed has provided some level of support to the market, we believe amending the Federal Reserve Act to
explicitly enable the Fed to buy municipal bonds would provide a more powerful backstop to the market. State and
local governments would also benefit greatly from additional aid that is currently being discussed in a potentially
forthcoming Phase 4 stimulus plan.

The opinions expressed are those of the Fund’s managers and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through March
31, 2020, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not
intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial
needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.
Diversification and asset allocation are investment strategies that attempt to manage risk within your portfolio but do not guarantee profits or protect against loss in declining markets.
All information is based on Class I shares.
The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises
caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined
with certainty.

Risk factors: The value of the Fund's shares will change, and you could lose money by investing. Fixed income securities are subject to interest rate risk and, as such, the net asset value of the fund may fall as
interest rates rise. Investing in below-investment-grade securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. The Fund may include a significant portion of its investments
that will pay interest that is taxable under the Alternative Minimum Tax (AMT). Exempt-interest dividends the Fund pays may be subject to state and local income taxes. The portion of the dividends the Fund pays that
is attributable to interest earned on U.S. government securities generally is not subject to those taxes, although distributions by the Fund to its shareholders of net realized gains on the sale of those securities are
fully subject to those taxes. The municipal securities market generally, or certain municipal securities in particular, may be significantly affected by adverse political, legislative or regulatory changes or litigation at the
Federal or state level. These and other risks are more fully described in the Fund’s prospectus. Not all funds or fund classes may be offered at all broker/dealers.

The financial products and services described in this website are offered only in the United States, Puerto Rico
and the U.S. Virgin Islands. Nothing in this website should be considered a solicitation to buy or an offer to sell such products
and services in any jurisdiction where the offer or solicitation would be unlawful under the laws of such jurisdiction.

IVY FUNDS® mutual funds and IVY VARIABLE INSURANCE PORTFOLIOS® are managed by Ivy Investment Management Company and are distributed by Ivy Distributors, Inc., InvestEd℠ Portfolios are managed by Ivy Investment Management Company and are distributed by Waddell & Reed, Inc. These financial products are offered by prospectus only. Waddell & Reed Financial, Inc. is the ultimate parent company of Ivy Distributors, Inc. and Waddell & Reed, Inc.

Before investing, investors should consider carefully the investment objectives, risks, charges and expenses of a mutual fund or portfolio.
This and other important information is contained in the prospectus and summary prospectus, which may be obtained here or from a financial professional.
Read it carefully before investing.

IVY INVESTMENTS℠ refers to the investment management and investment advisory services offered by Ivy Investment Management Company, the financial services offered by Ivy Distributors, Inc., a FINRA member broker dealer and the distributor of IVY FUNDS® mutual funds and IVY VARIABLE INSURANCE PORTFOLIOS®, and the financial services offered by their affiliates.